Director of the Australian Retailers Association, Russell Zimmerman, said the savings should be passed on before the Reserve Bank meets in February to make its first decision on interest rates for 2013.

Mr Zimmerman said compared to equivalent performing economies in Canada, New Zealand and Norway, which have cut interest rates to one per cent, 2.5 per cent and 1.5 per cent respectively, Australia was lagging with an official rate of three per cent.

"Since the start of the GFC (global financial crisis) Australia's banks have not passed on full interest rate cuts because of internationally high borrowing costs, with clear evidence these costs are lowering, consumer and business borrowing interest rates must be lowered," Mr Zimmerman said in a statement on Sunday.

He said poor retail sales figures for November 2012 indicated a stalling economy, and it was critical both the RBA and banks play their role in stimulating the economy.

"While Christmas sales initially appear to have been a little better than the previous year we know some categories were down and sales growth was still well below historic levels," Mr Zimmerman said.

"Australia is facing significant economic headwinds and the need for serious economic reform from whoever wins this year's federal election, in the meantime the big banks and RBA need to play their role in supporting the economy."